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Be Cautious When Trying to Apply a Proportionality Test to Nullify Preservation Requests

Created on October 27, 2011


Director of Marketing at Exterro


Most attorneys know that a proportionality test (cost-benefit analysis) will be applied when judging the fairness of a production request. But does this test apply to preservation requests too? In Pippins v. KPMG LLP, No. 11 Civ. 0377 (S.D.N.Y. Oct. 7, 2011), the court ruled that the answer is no. In this case, cost shifting or a limitation of the scope of the preservation request could not be applied.

In Pippins, the defendants, KPMG, motioned for a protective order to limit the scope of the preservation request or shift preservation costs to the plaintiffs, Pippins. Based on FRCP Rule 26 (b)(2), the rule “permits the court to limit discovery if the burden or expense of production outweighs its potential benefits." KPMG sought protection under this FRCP rule by arguing that “the burden of preserving the hard drives…is disproportionate to the potential benefit" (2,500 hard drives, costing $1.5 million).

The court determined KPMG's preservation obligations by conducting a three-pronged analysis:

  1. Is the information requested relevant?
  2. Is the information requested for preservation created for or by "key players" in the case? Key players are defined as those "likely to have relevant information."
  3. Is the preservation request “duplicative of other discovery materials subject to KPMG's" other preservation efforts?

Concerning the three points, the court ruled that KPMG did not prove that the requested information was (1) irrelevant, (2) not created for or by “key players" in the case, and (3) duplicative of materials subject to other preservation requests. In addition, the court would not apply the proportionality test because the “standard may prove too amorphous to provide much comfort to a party deciding what files it may delete or backup tapes it may recycle." Judge James Cott went on to note that “courts in this district have cautioned against the application of a proportionality test as it relates to preservation." The court advised the parties to continue to negotiate within meet and confer process and come to a consensus on sampling procedures to narrow the scope of preservation.

Pippins v. KPMG LLP reaffirms the notion that being proactive in e-discovery is critical. Parties who can quickly gain visibility into their IT infrastructure and understand the breadth and scope of the potentially responsive data will be empowered to negotiate more favorable preservation terms. In KPMG's case, increased visibility into the data most relevant to the matter would have allowed the legal team to present a stronger case to the court and opposing counsel, which may have proved the preservation request as excessive and/or duplicative and potentially saved the company thousands of dollars.

To read about how Exterro Zeta and how it helps organizations gain visibility into e-discovery data and preservation processes, click here.

Mike Hamilton, J.D. is the E-Discovery Market Analyst at Exterro, Inc. Hamilton works in a product management and marketing role to ensure Exterro's Fusion e-discovery applications closely reflect the needs of legal teams. Within the complex e-discovery world, Hamilton's knowledge, legal acumen and experience give him a valuable perspective on bridging the gap between IT and legal teams.